North Carolina hailed as model state for tax reform

Since taking control of the state government in 2010 and building a super-majority, Republicans have transformed North Carolina from one of the nation’s worst tax climates to one of the best.

“North Carolina, more than any other state in recent years, has provided a model for what pro-growth tax reform and conservative fiscal policy looks like, and it deserves more attention from the national media than it receives,” said Patrick Gleason, director of state affairs at Americans for Tax Reform.

Through multiple rounds of tax relief that began in 2013, North Carolina’s personal income tax is 30 percent lower while the corporate rate has been reduced by more than 63 percent and is now the lowest corporate rate among states that impose such a tax, Gleason noted in a recent report for Forbes.

“When Republicans took total control of the North Carolina government in 2010, the state had the highest personal and corporate income tax rates in the region,” Gleason said.

The GOP continued on the tax reform road last month by overriding a veto from Democratic Gov. Roy Cooper and enacting a new budget that again cuts the state’s personal and corporate income tax rates.

Under the new budget, North Carolina’s flat personal income tax rate will drop from 5.499 to 5.25 percent in January of 2019, and the corporate tax rate will fall from 3 to 2.5 percent, a 16 percent reduction.

The new budget also cuts the franchise tax rate for S-Corporations, the Forbes report noted.

According to the non-partisan Tax Foundation, North Carolina’s business tax climate now ranks 11th in the nation after being ranked 44th before Republicans began the reform effort.

“Because of the budget and tax reforms, North Carolina’s economy is growing, it has maintained a AAA bond rating, and the budget is experiencing a $580 million surplus,” John Hendrickson, a Research Analyst with Iowa-based Public Interest Institute, wrote for the Des Moines Register on July 18.

“Iowa policymakers can learn from North Carolina’s example. Priority-based budgeting along with prudent tax reform will create an opportunity for Iowa’s economy to grow and keep the vital functions of the state government funded. States that are following limited government policies of low tax rates and prudent fiscal policies are doing the best economically.”

North Carolina’s tax reform effort also contradicts the Left’s argument that lowering taxes only benefits the wealthy, Mark Shiver wrote for NC Capitol Connection on July 19.

The NC General Assembly’s non-partisan Fiscal Research Division reported on July 18 that the new state budget will provide tax relief to 230,000 lower-income citizens in the state.

“Those on the left cannot grasp the truth that lower taxes lead to growth,” Shiver wrote. “But, it is quite simple. Allow people and businesses to keep more of their hard-earned money, and they will spend more. Businesses will need to hire more employees to keep pace with demand, leading to more with income to spend and greater demand for goods and services. Revenue to the state will rise as more tax dollars are generated through consumption, not through being forcibly taken by the government. North Carolina has effectively implemented this logarithm, and unemployment is down, revenue is up and growth continues to rise.”

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